Trimble Inc (TRMB)

The liquidity ratios of Trimble Inc over the past five years indicate the company's ability to meet its short-term financial obligations with its current assets.

The current ratio, which measures a company's ability to cover its current liabilities with its current assets, has shown a moderate fluctuation. In 2021, the current ratio was the highest at 1.22, indicating that Trimble had $1.22 in current assets for every dollar of current liabilities. However, in 2020, the ratio decreased to 0.98 before rebounding slightly in 2022 and 2019. The current ratio of 1.00 in 2023 suggests that the company has $1 in current assets for every dollar of current liabilities.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. Trimble's quick ratio has also displayed volatility during the period under review. In 2021, the quick ratio was 0.83, indicating that the company had $0.83 in liquid assets available to cover each dollar of current liabilities. The quick ratio decreased to 0.51 in 2023, which may raise concerns about the company's ability to meet its short-term obligations without relying on inventory.

The cash ratio, which is the most conservative measure of liquidity, focuses solely on cash and cash equivalents in relation to current liabilities. Trimble's cash ratio has generally been on the lower side, with a decreasing trend from 0.27 in 2021 to 0.13 in 2023. This suggests that the company may have limited cash reserves available to cover immediate liabilities.

Overall, while Trimble Inc has maintained a current ratio around or above 1.00 over the years, indicating an ability to cover short-term obligations, the decreasing trend in quick and cash ratios may signal potential liquidity challenges in the future. It is essential for the company to closely monitor its liquidity position and manage its working capital effectively to ensure financial stability.

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Additional liquidity measure

The cash conversion cycle of Trimble Inc has varied over the past five years, indicating fluctuations in the efficiency of its cash conversion process.

In 2023, the cash conversion cycle improved to 85.42 days, reflecting a more efficient management of cash, inventory, and receivables compared to the previous year. This suggests that the company may have streamlined its operations to reduce the time it takes to convert its investments in inventory and receivables into cash.

In 2022, the cash conversion cycle increased significantly to 119.96 days, indicating potential challenges in managing working capital efficiently. A longer cash conversion cycle may suggest issues with inventory management, slow collection of receivables, or extended payment periods to suppliers.

Similarly, in 2021, despite a slight improvement from the previous year, the cash conversion cycle of 101.31 days still suggests room for enhancing working capital management practices. It is important for Trimble Inc to continue monitoring and optimizing its cash conversion cycle to ensure liquidity and operational efficiency.

In 2020 and 2019, the company experienced similar challenges with cash conversion cycles of 113.26 days and 105.28 days, respectively. These figures indicate a pattern of slower cash conversion, which may warrant a closer examination of working capital components and operational processes.

Overall, the trend in Trimble Inc's cash conversion cycle over the past five years highlights the importance of efficient working capital management in sustaining liquidity and financial performance. Continuous monitoring and improvement in cash conversion processes are crucial for optimizing the company's operational efficiency and financial health.